June 17 - European car sales continue to recover, posting a 4.3 percent rise in May. But as Ciara Sutton reports, excess production capacity and heavy discounting could be distorting the true level of demand.
Back in the fast lane after a six-year slowdown - or are they? Europe's car makers continued along the road to recovery in May with sales rising nearly 4 and a half percent. Volume brands Skoda, Renault and Opel led the way with strong growth. But deliveries at the world's two largest luxury makers BMW and VW's Audi weren't so strong, and it's thought heavy discounts and government incentives from the volume brands could be distorting the true level of demand. Paul Newton is an auto specialist at IHS. (SOUNDBITE) (English) IHS AUTO ANALYST, PAUL NEWTON, SAYING: "Generally, we are looking at an extremely low base of comparison, so there is bound to be a slight uptick. There are heavy discounts and there is also the ageing vehicle fleet, especially in a lot of the worse off markets. They haven't replaced their vehicles for so long, they have to." Demand for passenger cars in the EU increased for a ninth straight month, but the level of deliveries was the second lowest in May in over 10 years. (SOUNDBITE) (English) IHS AUTO ANALYST, PAUL NEWTON, SAYING: "The road to recovery first of all is not entirely smooth and it's not exactly permanent either. At the moment we're seeing very timid growth and it's fragile. External shocks or internal shocks could easily knock this off course. The key for us is we don't actually see the European market as a whole ever returning to the pre-crisis levels as people change their driving habits and increasing urbanisation." Four out of five of Europe's biggest markets kept growing. Gains in Germany and here in the U.K. offset a drop of nearly 4 percent in Italy. And surging demand from those other southern markets worst hit by recession, also helped boost the figures. Spain saw deliveries rise 17 percent, also marking the ninth straight month of gains. There was also a 37 percent rise in Portugal and 42 percent in Greece. Doubts may remain over the longer-term outlook. But for now, it's welcome news for an industry badly hit by Europe's recession.